Puerto Rico News Digest For July 8, 2016

ICE SEIZES COUNTERFEIT GOODS IN OSJ

From ICE:

"Special agents with U.S. Immigration and Customs Enforcement's (ICE)
Homeland Security Investigations (HSI) seized $6.5 million in counterfeit
merchandise Wednesday in Old San Juan with assistance from U.S. Customs
and Border Protection (CBP) and the U.S. Postal Inspection Service...During
the operation, HSI special agents and partner law enforcement officers target-
ed 14 retailers of counterfeit goods infringing on the trademarks of Gucci, Mi-
chael Kors, Prada, Channel, Ray Ban, Coach, Dolce & Gabbana, Oakley, Nike,
Ray Ban and the National Basketball Association. They also executed five sear-
ch warrants. The total manufacturer's suggested retail value (MSRP) of the sei-
zed goods is approximately $6.5 million. First time offenders of violating intell-
ectual property laws were served with a notification of a violation of law. In the
case of reoffenders, HSI will present their cases for prosecution..."

SCIENTISTS OPPOSE LA PARGUERA BILL

From The San Juan Daily Star:

"Opposition to Senate Bill 1621, which would permit the permanence of summer 

houses illegally constructed on public land on the La Parguera shorefront in Lajas, 

is growing as more than 50 experts in oceanography, ecology, geology, planning 

and other disciplines related to natural and environmental science signed a letter 

directed to Gov. Alejandro García Padilla asking him to veto the bill that was pas-

sed by the Puerto Rico Legislature last week..."

MELBA ACOSTA RESIGNS AS GDB PRESIDENT

From Caribbean Business:

"On Thursday, La Fortaleza announced the resignation of Government Develop-

ment Bank (GDB) President & Chairwoman Melba Acosta, effective July 31. In 

her resignation letter dated July 6, she says it is time to refocus her professional 

career, after 12 years of public service, three of which took place under the Alej-

andro García Padilla administration...With Acosta’s exit, the GDB would have 

four of its seven director posts vacant. Although it didn’t publicly announce it,

La Fortaleza filled on May 17 two vacancies with the appointment of Rafael Vé-

lez Pérez and Carlos Bonilla Agosto..."

PRASA TO START SEEKING EXTERNAL FINANCING

From News Is My Business:

"Puerto Rico Aqueduct and Sewer Authority Executive Director Alberto Lázaro 

confirmed Thursday the agency is waiting for the governor to sign the law that 

will allow it to pursue external financing to begin talking to creditors next month. 

Once the PRASA Revitalization Act is signed, the public corporation will have 

the leverage it needs to approach potential creditors for some $900 million in new 

funding to cover infrastructure improvements, payments due to contractors and 

other expenses, Lázaro said, during the monthly luncheon sponsored by the Ass-

ociated General Contractors..."

PR Treasury Reports Revenues $76.2 Million Above Estimates

Press Release

Government Development Bank


PUERTO RICO TREASURY REPORTS GENERAL FUND NET REVENUES
TOTALED $1.28 BILLION IN APRIL, $76.2 MILLION ABOVE ESTIMATES

Sales and Use Tax totaled $207.9 million, $87.8 million above April 2015


(San Juan, Puerto Rico) – Treasury Secretary Juan Zaragoza Gómez reported that 
net revenues recorded by the General Fund in April 2016 totaled $1.28 billion, $76.2 
million above revised estimates, and $47.7 million below net revenues in April 2015.

Corporate income taxes were the main revenue driver in April with $409.2 million in 
collections, a year-over-year increase of $32.5 million, or 8.6%, representing 31.9% 
of total revenues for the month, and exceeding revised estimates by $69.7 million. 
A majority of corporate income tax revenues are collected in April, as most corpora-
tions’ returns, as well as the first estimated tax payments for the tax year, are due
in April.

Individual income taxes were another important revenue category with $302 million 
in collections, a $57.4 million year-over-year decrease. One of the reasons for this 
decrease is that collections in April 2015 included $29 million in non-recurring reve-
nues from special laws. April 2016 Sales and Use Tax (“SUT”) revenues totaled 
$207.9 million, $87.8 million above April 2015 receipts. The difference is the result 
of the increase in the state SUT rate to 10.5% from 6% and the 4% tax on designa-
ted business-to-business and professional services (known as B2B).

B2B collections totaled $12.6 million in April. SUT revenues were allocated as foll-
ows: $197.7 million to the General Fund; $9.9 million, or 0.5%, to the Municipal Ad-
ministration Fund; and $270,000 to the Film Industry Fund.

Excise tax categories registered both upward and downward year-over-year chan-
ges. Foreign excise taxes and motor vehicle excise taxes increased by $4.8 million 
and $4 million, respectively,while alcoholic beverages and cigarette excise taxes de-
creased by $1 million and $8.8 million, respectively.

Finally, in April the category known as “Other” registered a $130.8 million decrease. 
This difference is the result of revenues in April 2015 that were non-recurring this 
year. Act 44-2015 allowed the pre-payment of a special tax on certain transactions. 
These transactions included a pre-payment, at a reduced rate of 5%, of taxes on 
corporate dividends for future distributions of accrued benefits and profits. Reven-
ues from prepaid taxes on dividends, which are classified under the category of 
Other, were $111 million in April 2015.

Fiscal year-to-date (July-April) revenues totaled $7.54 billion, a year-over-year incre-
ase of $213.3 million, or 2.9%, $45.7 million above revised estimates, and $238.5
million below estimates included in the original FY 2016 budget. Treasury Secretary 
Zaragoza Gómez noted that based on revenue behavior up to April, estimates inclu-
ded in the revised $9.29 billion budget for FY 2016 are expected to be met.

GDB Creditors Agree To 53% 'Haircut'

Press Release

Government Development Bank


GOVERNMENT DEVELOPMENT BANK FOR PUERTO RICO
ANNOUNCES FRAMEWORK OF INDICATIVE TERMS FOR
RESTRUCTURING WITH GDB AD HOC GROUP OF CREDI-
TORS

Creditors Agree on 53% Haircut for Global Restructuring and Forbea-
rance From Exercising Remedies 

Announcement Follows Declaration of Moratorium by Governor on
Obligations of GDB 

GDB Will Pay Interest on May 1 


San Juan, P.R. – The Government Development Bank for Puerto Rico (“GDB”)
announced today that it has negotiated a framework of indicative terms for a
restructuring of GDB bonds with a group of bondholders (known as the “Ad
Hoc Group”) holding approximately $900 million of GDB’s outstanding notes
(the “Old Notes”). The framework includes an understanding with the Ad Hoc
 Group regarding key terms for a restructuring of a portion of GDB’s Old Notes
 held by the group and a path forward to a broader restructuring of all of GDB’s
Old Notes. The agreement on key terms will provide a framework for GDB and
 the Ad Hoc Group to continue negotiations over the coming weeks with a view
 to enter into an agreement in principle that would memorialize in full the terms
 and conditions of the proposed restructuring. As part of the understanding rea-
ched today, the Ad Hoc Group and GDB intend to negotiate related terms over
the next 30 days and forbear from pursuing legal action related to the May 1st
debt service payment during such negotiations.

 The agreed key terms contemplate a two-step restructuring of GDB’s obliga-
tions, in which all holders of the Old Notes (including the Ad Hoc Group) wo-
uld first exchange (an “Interim Exchange”) their current holdings for new notes
at GDB (the “Interim Notes”), to be followed by an exchange of such Interim
Notes as part of a future global restructuring of the Island’s debt that includes
 GDB’s debt (the “Global Restructuring”). As part of the agreed key economic
terms, creditors would agree to haircut of 43.75% of the face amount of their
 Old Notes in the first-step exchange. In addition, as part of the transaction,
 bondholders would agree to the proposed treatment for their notes, in a sec-
ond step exchange as part of a Global Restructuring, that would result in an
agreed haircut of 53% of the face amount of their Old Notes. The agreed fra-
mework of key economic and structural terms for the Interim Exchange and
treatment in the Global Restructuring is set forth more fully in Annex A here-
to. As noted in Annex A, many important terms of the transaction remain sub-
ject to further negotiation between the parties. In addition, the transaction wo-
uld be subject to several conditions, which would need to be met over the co-
ming months before the deal could proceed.

Importantly, the proposed terms of the Interim Exchange require 100% partici-
pation by all bondholders, including, in addition to the Ad Hoc Group, the state-
chartered credit unions in Puerto Rico (or “cooperativas”) and other large insti-
tutional groups on island. As a result, the proposed transaction is being designed
to take into account the varied interests of all its creditors, and GDB and the Co-
mmonwealth plan on continuing discussions with such groups over the coming
weeks to ensure that any agreement in principle reflects their concerns in a debt
restructuring. Similarly, as a comprehensive deal for all GDB stakeholders, the
transaction contemplates providing a path forward to depositors, including by
providing collateral for their deposits, as GDB works through its challenges.

Without federal restructuring legislation, including the tools to bind non-con-
senting creditors, the transaction would be highly unlikely to reach the requi-
red participation levels. In the absence of federal legislation, the GDB would
not be able to complete the deal as proposed, and the Commonwealth as a wh-
ole would not be able to move towards a comprehensive restructuring of the
island’s debt.

The announcement of this framework of indicative terms with the Ad Hoc Gro-
up follows the declaration of the Governor of the Commonwealth of Puerto Ri-
co of a moratorium on debt service obligations of GDB. Consistent with the te-
rms of the Governor’s executive order, GDB intends to pay interest on its bonds
due May 1.

“The agreement on key terms with the GDB Ad Hoc Group is the result of ma-
ny weeks of negotiations and discussions between us and the Ad Hoc Group. We
appreciate the good faith and patience they have shown throughout this process
the work both they and Commonwealth officials have put into ensuring that the
interests of all Commonwealth stakeholders are respected going forward. While
we have many steps to go before we reach a full agreement on a deal and that
deal can be consummated, this agreement represents a vital first step in the Co-
mmonwealth’s path to economic recovery,” said GDB President Melba Acosta
Febo.

“To be very clear, this is but one piece in a complicated process that will require
every Commonwealth creditor to participate. The time necessary to reach even an
agreement on key terms with 1/4 of a single issuer’s bondholders demonstrates
 that, in the absence of federal legislation that gives Puerto Rico the tools it needs,
 the island will be condemned to a quagmire of economic stagnation with no relief,
 for which both 3.5 million American citizens and our creditors will bear the con-
sequences.”

GDB Rejects Shutdown & Privatization Rumors

Press Release

Government Development Bank

April 1st, 2016


Today, Melba Acosta Febo, President of the Government Development Bank
for Puerto Rico ("GDB" or the “Bank”), issued the following statement in res-
ponse to several rumors recently reported in the media:

“The Government Development Bank became aware of rumors claiming that
a bill will be introduced today to shut down the Bank. This rumor is false – the
GDB will neither shut down nor be privatized.

This irresponsible rumor is damaging to the Bank as an institution, as well as
needlessly harmful to our employees and their families. Bank management has
met with employees and informed them that, due to the fragility of the Bank’s
liquidity, all available options are currently being reviewed. These options will
responsibly address the issues facing the Bank and will not involve the dismi-
ssal of public employees. As we have for weeks, GDB representatives continue
to engage with a considerable group of our creditors about the restructuring of
the GDB’s debt. As we have stated publicly, the Government is also considering
additional measures to address this situation, such as declaring a temporary mo-
ratorium on payments, and amending the GDB charter.

I, and representatives of the Puerto Rico Electric Power Authority (“PREPA”),
were recently in London attending meetings regarding the GDB’s and PREPA’s
soon-to-expire insurance policies. This was a long scheduled trip – though these
policies are active, we are in the process of negotiating their renewal. During the-
se meetings, I provided an overview on the Commonwealth’s finances, covering
the Krueger report, the Fiscal Adjustment Plan, the public offer made to bondhol-
ders and the status of the Commonwealth’s and PREPA’s debtrestructuring nego-
tiation processes.

As I have stated publicly on multiple occasions, including this week, it is impor-
tant that everyone in Puerto Rico understand that the GDB’s fiscal standing, as
well as the Commonwealth’s fiscal standing, is delicate due to the fiscal crisis we
are confronting. For this reason, the GDB’s Board of Directors and management
continue to urgently evaluate all available options to safeguard public finances.
We will continue to move forward on several initiatives simultaneously as no
final decisions have been made at this time.”

GDB President's Statement On Default

August 3, 2015


STATEMENT FROM GOVERNMENT DEVELOPMENT BANK
PRESIDENT MELBA ACOSTA FEBO ON THE SERVICE OF
PUBLIC FINANCE CORPORATION (PFC) BONDS

San Juan, P.R. – Today, Government Development Bank for Puerto Rico
(“GDB”) President Melba Acosta Febo issued the following statement on
the service of Public Finance Corporation (PFC) bonds:

“Due to the lack of appropriated funds for this fiscal year the entirety of the
PFC payment was not made today. This was a decision that reflects the se-
rious concerns about the Commonwealth’s liquidity in combination with the
balance of obligations to our creditors and the equally important obligations
to the people of Puerto Rico to ensure the essential services they deserve
are maintained.

“PFC did make a partial payment of interest in respect of its outstanding
bonds.The partial payment was made from funds remaining from prior le-
gislative appropriations in respect of the outstanding promissory notes se-
curing the PFC bonds. In accordance with the terms of these bonds, which
stipulate that these obligations are payable solely from funds specifically
appropriated by the Legislature, PFC applied these funds—totaling appro-
ximately $628,000—to the August 1 payment.”

Puerto Rico News Digest For May 22, 2015

HIGLER'S FAMILY IN PR FOR HEARING

L: Laurens Higler. R: Gerardo de La Paz.

Relatives of Laurens Higler, the Dutch globetrotter and sailor who was
killed in a hit and run car accident in  March, are in Puerto Rico to attend
a court hearing for 49-year-old Gerardo De La Paz, the man accused of
hitting Higler with his car by the side of the road in Guayama and fleeing
the scene. Mother Rianne Higler stated "It is unforgivable that he didn't
stop the car, that he didn't call 911 and that he didn't help my son", in re-
gards to De La Paz, as reported yesterday by El Nuevo Dia. Laurens
Higler would have turned 27 years old on May 20.

At the hearing, De La Paz -- who is free but wearing an ankle monitor --
opted to go directly to trial for the charges of negligent homicide and vio-
lating the recently amended Article 5.07 of Transit Law 22. He was also
driving with an expired driver's license. The judge set the trial date for
June 26. De La Paz could face prison time, but there is  also the possibility
that he might only get a suspended sentence. After the hearing, De La Paz
agreed to meet the late Higler's family in private, but after the brief encoun-
ter, De La Paz hurried out of the building accompanied by his lawyers.

HOUSE APPROVES 11.5%  'IVU' TAX

From Caribbean Business:

After much debate and opposition, the House of Representatives app-
roved Thursday the tax bill that calls for the implementation of an
11.5% sales tax at cash registers, up from the current 7% paid under
the sales & use tax (IVU by its Spanish acronym), after introducing
several amendments on the floor. The final vote count was 26 in favor
and 24 against, including two Popular Democratic Party (PDP) legisla-
tors, Reps. Carlos Vargas and Angel Matos, and the New Progressive
Party minority delegation. It now moves to the Senate, where discussi-
on on the amended bill is expected to take place Friday, with the upper
chamber's session slated to begin at 10 a.m.

ACOSTA BLASTS MOODY'S GDB DOWNGRADE

From News Is My Business:

Government Development Bank President Melba Acosta came down
hard on Moody’s Investors Service’s decision to downgrade the Co-
mmonwealth’s credit rating deeper into junk status by saying the move
shows “ratings agencies are totally out of tune with what’s happening”
in Puerto Rico. Reading off an email she said she received earlier in the
day from a banker who expressed to her that markets were reacting fa-
vorably to the proposed increase in the sales and use tax — up to 11.5
percent from 7 percent approved Thursday by the House — and about
the budget, Acosta called Moody’s decision “a bit ironic.”

BUS OWNERS INDICTED FOR BID-RIGGING

From FBI:

A federal grand jury in San Juan, Puerto Rico, returned an indictment
against five individuals for participating in bid rigging and fraud cons-
piracies at an auction for public school bus transportation contracts in
Puerto Rico’s Caguas municipality, the Department of Justice announ-
ced today. A seven-count felony indictment was filed yesterday in U.S.
District Court of the District of Puerto Rico in San Juan against five bus
transportation company owners: Gavino Rivera-Herrera, Luciano Vega-
Martínez, Alfonso Gonzales-Nevarez, José L. Arroyo-Quiñones and
René Garay-Rodríguez.

Count one charges the bus owners with participating in a conspiracy
to rig bids and allocate the market for public school bus transportation
services in the Caguas municipality. The second count charges the bus
owners with conspiracy to commit mail fraud and counts three through
seven charge the bus owners with committing mail fraud. According to
the indictment, the defendants and others defrauded, and conspired to
defraud, the Puerto Rico Department of Education and the Caguas mu-
nicipality, among others, in order to fraudulently obtain contracts for
school bus transportation services.